The Central Bank has once again allowed Licenced Commercial Banks (LCBs) and NSB to invest in International Sovereign Bonds (ISB), ending the temporary suspension first imposed in April. 

The relaxation however comes with new conditions. 

Central Bank said LCBs and NSB can purchase ISBs in the second market subject to the following conditions. 

1. Source of funds to be limited to fresh borrowings from overseas and should be established to the satisfaction of the CBSL. For this purpose, LCBs and NSB are required to provide documentation of the borrowings overseas

2. Investment of funds sourced in Sri Lanka Developments Bonds (SLDBs) and ISBs in the proportion of 50% each, and LCBs and NSB should submit information on the date of investment, International Securities Identification Number (ISIN) and amount invested in ISBs and SLDBs

LCBs and NSB have to adopt risk mitigation measures to prevent maturity mismatches between the borrowings and the ISB/SLDB investments, adopting appropriate risk mitigation arrangements to bridge any short-term maturity mismatches that may occur in addition to other risk mitigation measures already prescribed or followed. 

CBSL temporarily suspended the investments from 23 April in a bid to ease pressure on the exchange rate and considering the substantial amount of possible or potential outflow of foreign exchange by banks and its impact on banks risk management.

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